April 28, 2017

DNCA's weekly market outlook by Igor de Maack

Management comment

Investors have continued to reallocate into European equities as the weeks go by. Last week saw the heaviest inflow into this asset class since December 2015 ($2.4bn) which had already recorded five consecutive weeks of net positive investments. Optimism is progressively being restored among markets, particularly after the first round of the French presidential elections.

On the monetary front, at the last policy meeting, the European Central Bank (ECB) left its base rates unchanged, highlighting that the economic recovery is gathering pace. Net monthly asset purchases were reduced from EUR 80 to 60 billion from April onwards, with the programme extended until the end of December 2017 or beyond, if necessary.

The US and the eurozone central banks are now gradually leaving it up to democracies, and their leaders, to undertake structural reforms or to implement measures designed to put the economy back on a steady growth trend, which is both balanced and, where possible, fair. With electoral risk diminishing in France, as Emmanuel Macron remains in the lead according to the opinion polls, for the second-round run-off, by a margin of 60%-40%, despite a high abstention rate, investors may discover that the planets are once again favourably aligned in continental Europe. The bullish factors which have combined include 1/ the economic recovery 2/ monetary policy 3/ election results avoiding extremist risk and 4/ upwards earnings forecast revisions. Regarding this last factor, the first-quarter reporting season has seen some companies soundly beating consensus, particularly major French groups such as Renault, Sanofi and Total.

In the US, the markets are waiting to see how the tax-cut programme proposed by Donald Trump fares before Congress, particularly the plan to slash the corporate rate from 35% to 15%, before resuming their bullish trend. Since his election, the new president has made many promises but delivered little, and as we say in France, promises engage only the listener...

Igor de Maack, Fund manager and spokesperson at DNCA. This article was finalised in April 28th, 2017.

This promotional document is a simplified presentation and does not constitute a subscription offer or an investment recommendation. No part of this document may be reproduced, published or distributed without prior approval from the investment management company.

DNCA Investments is a trademark held by DNCA Finance

Investors have continued to reallocate into European equities as the weeks go by. Last week saw the heaviest inflow into this asset class since December 2015 ($2.4bn) which had already recorded five consecutive weeks of net positive investments. Optimism is progressively being restored among markets, particularly after the first round of the...
2017-04-28